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How Does The Federal Reserve Impact The Financial Crisis

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It is not true that Federal Reserve has an unlimited supply of money. It has reserves which it is used during the period of crisis/liquidity crunch to generate money in the economy. Through its tools of open market operation, the Federal Reserve manages monetary policies in the economy. To encourage investment/borrowing, the Federal Reserve lowers interest rates. To fight the impact the financial crisis in 2010, the Federal Reserve decided to buy mortgage-backed bonds as part of its effort to boost the economy. This is known as QE1. It’s the nickname given to the Federal Reserve's first round of quantitative easing. There are three in U.S history. (www.thebalance.com) To begin QE, central banks generate money by buying securities, such as government

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